15.07.2003 Feature Article

Ghana's Foreign Direct Investments, Up Or Down?

By Press
Ghana's Foreign Direct Investments, Up Or Down?
15.07.2003 LISTEN

Amos Safo for Public Agenda In Ghana, statistics on everything from HIV/AIDS to inflation and foreign direct investments are a major cause of conflict among politicians, academics and the man on the street.

Over the last few weeks debate on inflation captured national focus, with government, the opposition and civil society groups undecided on where exactly Ghanaians want inflation to stand. The question that rages on is, "how much is inflation too much?" At the heart of the dilemma is the lack of harmonisation of statistics for the common national use. Debate on inflation had hardly ended when another on foreign direct investment came up. Central to the issue of investment is how attractive Ghana is as an investment destination.

The debate started as a political spin. Last week Professor John Evans Attah Mills, presidential Candidate of the opposition National Democratic Congress told journalists at a press conference that inspite of President John Agyekum Kufuor's numerous investment trips abroad, Ghana is reported by the World Economic Forum to be among the five least attractive investment destinations from a total of 21 countries.

Prof. Mills' allegation brought the ruling NPP-government to its feet. Quoting from the same World Economic Forum, June 2003 Report, Finance and Economic Planning Minister, Yaw Osafo-Maafo discredited the former university lecturer's assertion. The report, which was made available to the press stated that in the Public Institution Index, Ghana was ranked 8th out of 21 countries. In the Contracts and Laws Index, Ghana again ranked 8th out 21, in the Corruption Index, Ghana placed 10th as least corrupt countries out of 21.

According to Fiona Pau, an economist of the World Economic Forum, the Public Institution Index is a very important component of the forum's assessment of a country's competitiveness and overall prospects for economic growth.

How then could the ruling government and the opposition be reading different meaning into a public document whose findings are self-explanatory? The practice of putting a spin on statistics for political gain has been the telltale of government-opposition relationship.

The political spins notwithstanding the outlook for foreign direct investment flow in 2001-2002 was not very promising. According to the State of the Ghanaian Economy 2002, Published by the Institute of Statistical, Social and Economic Research (ISSER) from a peak of $474.6 million in 1997 annual FDI was down $58.9 million in 2002.

The total investment comprises foreign capital of about $1.billion or 82.95, $461.4 million in equity and about $1 billion in foreign loans. Sadly, local participation accounted for only 17.1% of total investments. The report said Ghanaian-foreign joint ventures accounted for 745 of total investment, with foreigners owning the remaining 26%. These investments were expected to create about 77,036 jobs, with the manufacturing sub-sector likely to generate the largest share of about 32.8%.

According to the report, the services sub-sector attracted the largest number of projects (29.4%), followed by the manufacturing sector (27.8), while the mining sub-sector attracted the largest amount of investment in the industrial sector.

Figures from the Ghana Investment Promotion Center (GIPC) quoted in the report show that the center recorded 138 projects in 2002 at a cost of $65.13 million. "This amount confirmed the declining trend in investment since the peak of 1997, when the country recorded 218 projects at a cost of $631.60 million." The location of these projects shows a very high concentration in the Greater Accra Region, despite provision of incentives for locating industries outside Accra.

The report said in terms of FDI it appears Ghana has lost attraction as inflows declined last year. It said the declining trend is disturbing in view of intensified mass of export-oriented investors to the country in order to accelerate export-led growth.

The export led-growth, according to the report are within the framework of the Trade and Investment Gateway Project of 1998 and the Free Zones and Presidential Initiatives. The report however, concedes that the decline is consistent with the falling trend observed in the whole of Sub- Sahara Africa.

Officials of the GIPC agree that for the 2002 period FDI did not do well as was expected. The Public Relations Manager of GIPC, Kwabena Antwi told this reporter that despite the set back in 2002 provisional figures for the second quarter show that FDI brought in$20.25 million. "This figure shows that investments are beginning to come up again after the drop in 2002."

Documents made available to this paper indicate that Ghana ranks high as a preferred destination for FDI. A 2002 United Nations Industrial Development Organisation (UNIDO) report, which surveyed Nigeria, Uganda, Ethiopia, Tanzania and Ghana, placed Ghana first. Firms were asked to explain the main reasons why they invested in the countries surveyed. The firms gave access to local market as the strongest reason for their preference for Ghana.

"Better economic conditions in Ghana contrasted sharply in its favour for FDI than in the other four countries. A total of 14 percent of FDI investors gave this as a reason for investment as against 2.3 percent for the other countries. This should be a strong selling point for FDI since it is one of the largest differences between Ghana and some of its competitors", says the report.

The UNIDO report said when firms were asked to indicate preferred location for future investment; a high proportion indicated that Ghana remained their first choice. This was followed by Nigeria and Cote d'Ivoire.

The Investment Report 2000 also listed Ghana sixth among 20 countries according to their attractiveness for FDI in 2000-2003. Only South Africa, Egypt, Morocco, Nigeria and Tunisia topped Ghana. Ghana also maintained the sixth position among the same countries ranked according to their progress in improving business environment from 2000-2003.

The report said South Africa was the most frequently cited, followed by Morocco and Egypt. Next on the list are Tunisia, Cote d'Ivoire and Ghana. The growth and size of local markets access to regional markets ranked next to the profitability of FDI as the most enticing factors influencing corporate investment decisions.

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